New Mortgage Rules Take Effect November 1, 2012 – From you Vancouver Mortgage Broker

New Mortgage Rules Take Effect November 1, 2012 – From you Vancouver Mortgage Broker

November 1 is the day when the new mortgage regulations are put out by Office of the Superintendent of Financial Institutions Canada (OSFI).

These mortgage regulations are called the B-20 guidelines and apply to any mortgage lender which is federally regulated. This essentially includes all banks and trust companies. These guidelines don’t apply to all lenders such as credit unions, but they cover almost all of the big players. Many experts expect these changes will also affect how non-banks perform in the process.

Frankly, a lot of lenders have been more or less anticipating these changes and have implemented their own changes to reflect B-20 guidelines amendments to the mortgage markets.

In a nutshell, these new changes which have come into effect simply have made it that much harder for some prospective home buyers to get mortgage financing to buy.

New Mortgage Guidelines

Here is a partial breakdown of some of the changes which are now influencing the mortgage market here in Vancouver.

1. Uninsured mortgages, also known as non-prime mortgages, will require that potential home buyers have a much more stringent debt ratio. There are some lenders, who specialize in non-prime mortgages, who have never even published their debt ratios before the changes which were made by OFSI.

2. More restrictions will be placed on those individuals who are self-employed and are placing more than 20% as a down payment. A home buyer who is self-employed will have to supply sufficient proof that they can financially prove they earn the salary that they are claiming to earn. More documentation will be expected through their business earning statements and bank financials, and will be required by lenders for the self employed to back up their income claim.

3. Guidelines will also be tightened in the manner used to calculate a home buyer’s monthly payments which they are making for any debts which are not secured. Currently, many lenders use 3% of any outstanding unsecured debt balance as a guideline, while some other lenders may be more lenient.

4. Heating cost estimations, which are also included in the calculation of a buyer’s debt ratio, will be subject to more stringent policies in making this estimate.

5. Cash-back down payment mortgages will also no longer be accepted. This policy applies to all lenders with the exception of credit unions.

6. Down payments which are obtained by borrowing at some mortgage lenders will also be eliminated.

Although the new lending regulations implemented by OSFI do not apply to all lenders, many experts feel that these new guideline changes will eventually spread to all lenders in the industry.

Credit Unions are exempt from federal regulations unless they are specifically regulated by provincial legislators or apply for a federal charter. For the time being they may have an advantage over other federally regulated lenders, at least for the short term

There is no doubt that the new guidelines are intended to cool down the housing market. Many experts think these guideline changes are sound, and that lenders are taking a more responsible approach to their lending practices in spite of the new guideline changes.